The Impact of Changing Corporate Strategies on Communities, Unions, and Workers in the United States of America
| Published date | 01 March 1997 |
| Date | 01 March 1997 |
| Author | Charles Craypo |
| DOI | http://doi.org/10.1111/1467-6478.00034 |
CHANGING CORPORATE STRATEGIES IN THE UNITED
STATES OF AMERICA
1.
Corporate power and institutional responses
Corporate strategies reflect corporate structure, conduct, and performance.
Currently corporate structure is becoming more consolidated and global,
corporate conduct more focused on rising share prices, and corporate
performance more profitable. The strategies that result give priority to
structural mergers and acquisitions, operating mobility, and production
cost minimization. These trends make labour and communities insecure,
unstable, and poorer, as corporations abandon long-term commitments to
and investments in their traditional workforces and locations. In America
today real wages are falling, jobs are becoming more contingent and without
health and pension benefits, median family incomes are declining, and
income inequality is rising.1And communities are finding it harder to provide
infrastructure, public places, good schools, and safe neighbourhoods.
The modern business corporation arguably has enjoyed economic and
political hegemony in the United States since its inception in the early part
of the last century; to be precise, you might say, since Tom Scott wrested
control of the Pennsylvania Railroad from its shareholders in the 1870s.2
During and after the American Civil War big business flourished, in large
measure thanks to generous government subsidies coupled with a contra-
dictory but seemingly genuine non-intervention policy when it came to the
financial enormities of the new industrialists. Nor did the captains of industry
– the Carnegies, the Rockefellers, and the J.P. Morgans – have to suffer
shareholder interference during the ‘Gilded Age’ of the 1880s and 1890s;
they simply owned the lion’s share of the productive assets they were
deploying to make money.
© Blackwell Publishers Ltd 1997, 108 Cowley Road, Oxford OX4 1JF, UK and 238 Main Street, Cambridge, MA 02142, USA
* Department of Economics, University of Notre Dame, Notre Dame, Indiana
46556, United States of America
10
JOURNAL OF LAW AND SOCIETY
VOLUME 24, NUMBER 1, MARCH 1997
ISSN: 0263–323X, pp.10–25
The Impact of Changing Corporate Strategies
on Communities, Unions, and Workers in the
United States of America
CHARLES CRAYPO*
11
© Blackwell Publishers Ltd 1997
Their strategy was direct and ruthless: consolidate existing capacity
through both horizontal and vertical mergers and acquisitions, in addition
to internal expansion; restrict product supply and raise prices; cut labour
costs by breaking unions, transportation costs by exacting rebates, and
material and supply costs by threatening vertical integration into the
businesses of their buyers and sellers. ‘This large business strategy is the most
admirable trait of the great businessmen who with force and insight swing
the fortunes of civilized mankind’, Thorstein Veblen observed wryly in his
analysis of American business enterprise around the turn of the century.3
With the organization of U.S. Steel in 1901 for the purpose of
monopolizing iron and steel production, the ‘robber barons’ began to give
way to the modern bureaucratic oligopoly with its strategy of shared
markets. As Berle and Means demonstrated empirically,4control of the large
corporation passed from owner-managers to professional managers who ran
things largely independently of shareholder control because the latter took
no great interest in the operation of the firm but instead concentrated on
relative dividends and share prices. Accordingly, corporate executives had
little interest in destroying the competition, as had the robber barons, but
in co-operating with them in stabilizing oligopolistic markets to ensure
steady earnings and dividends as well as rising share values. Administered
pricing was superior to cut-throat pricing and managed competition to
mutually destructive competition. Such explains the standard practice
among the leading firms in concentrated industries.
But these great concentrations of power eventually undermined the
economic stability and predictability they sought to ensure by creating the
great inequalities of wealth and income that contributed to, if not created,
the Great Depression. Subsequent New Deal reforms gave rise to the
countervailing power that was deemed essential to economic growth with
equity in the form of labour unions and regulatory legislation and their
accompanying panoply of administrative agencies.5Corporations continued
to shape economic events and outcomes but with accountability and
restraint, albeit admittedly limited and, as it turned out, vulnerable.
2. Post-war prosperity and economic structure
The post-war years, especially the 1960s, were the golden years of American
capitalism as far as workers, communities, and unions were concerned. Now
everyone shared and had a stake in industrial growth and economic
prosperity, unlike the polarized and short-lived expansions of the 1880s and
the 1920s. Now workers could buy the cars, appliances, and TV sets they
produced and, for many, also move to the suburbs and make down payments
on summer cottages. Now communities could provide services and structures
assured of continued revenues from high-wage tax payers and profitable
businesses. And because the social and economic reforms of the 1930s had
largely carried over into the post-war period, and then were expanded upon
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